Strata Reforms [NSW]: Stage 1 Wrap Up
My 113 ideas & suggestions about the initial discussion paper & questions …
My short series of articles about what needs to be reconsidered and addressed in NSW strata laws was prompted by the first Discussion Paper. Whilst this law reform process has a long way to go and the issues will change, it’s a timely opportunity to re-think strata building operation and regulation. So, here’s a summary of my 113 ideas and suggestions.
Over the last 8 weeks I’ve been outlining the issues, as I see them, arising out of the latest NSW discussion paper for strata laws that asked for ‘feedback from any member of the public interested in the laws governing the development and management of strata schemes in NSW’.
So, I’ve now made my suggestions in a detailed submission about the changes that should be made to strata laws based on those articles. Plus, I’ve also created a table of short responses to the 140 discussion paper questions.
And, in my first article on the topic NSW Strata Law Reform Deja Vu you can find a short history of NSW strata title laws and changes.
If you’d like a copy of my detailed submission or my short responses to the discussion paper questions, email me at email@example.com.
Please also let me know if you’ve made any submissions to NSW Fair Trading yourself in the comments or by email, so I can learn from you and add them to my list of issues that need addressing.
There’s already been a 1-month extension given for submissions as outlined in Strata Snaps; Mar 11, 2021. So, let’s see when something happens next.
Mar 14, 2021
113 IDEAS & SUGGESTIONS FOR NSW STRATA LAW REFORMS
Here are my general 113 suggestions about what needs to change in NSW strata laws.
Policy considerations & objectives
1. Strata titling should permit flexible and innovative development and redevelopment options for new and existing strata complexes whilst ensuring certainty for land titles, boundaries, and core binding property documents for all stakeholders
2. The different titling regimes for medium and high-density real estate need to be merged so that they operate consistently. There’s no good reason why owners’ experiences in strata buildings should differ significantly in strata title, community title, or part strata.
3. Strata governance models and hierarchies need to be re-thought and re-structured based on clear policy positions about decision making, authority, and accountability [such as whether owners should always overrule elected committees and majorities should always overrule minorities].
4. Strata information collection, retention, sharing, and access need to be upscaled so that complete information is more easily available to owners (and other stakeholders) about what has, is, and will happen in strata buildings.
5. More flexible options for discussions, debate, and decision-making by strata owners and stakeholders need to be permitted so that engagement levels increase from the current minimums and the decisions better reflect strata owners’ views and interests.
6. Long-term (non-owner) residents’ interests in strata buildings need to be better recognised. They form almost half the strata residents in NSW and are critical to the strata sector’s economic and social future.
7. The construction and maintenance standards of the strata buildings need to be improved and guaranteed (at construction, for the first owners, and in the medium and longer-term) by improved approval, disclosure, checking and re-checking systems, plus remedial rights.
8. Differences between the experience (and cost) of property ownership between free-standing and medium/high-density real estate need to be reduced or eliminated so that strata property is not and does not become a ‘second-rate’ property option.
9. Up-to-date core information about strata buildings should be publicly accessible so that stakeholders can find it and effectively communicate with those buildings.
10. The position of non-owners who assist strata corporations [like managers, contractors, advisers, and regulators] needs to be better defined as traditional roles and business models change to meet new owner, committee, and building needs.
11. Bugs in strata laws need to be identified and fixed more routinely by smaller-scale amendments [and not as part of major strata law reforms every 5-10 years] as typically occurred during the 70s, 80s, 90s, and 00s.
Lessons from past reforms
12. All law changes should enhance the uniformity of strata laws around Australia rather than create or exacerbate differences.
13. Don’t ignore the [strata tenant] elephant in the room this time and allow medium - long term tenants to engage more in strata operations.
14. The strata renewal and collective sale provisions are too new to properly assess and should be left alone for stakeholders to use them more and for Courts to make more decisions about how they operate.
15. New provisions that create more information disclosure and transparency about strata buildings will have a significant positive impact on all stakeholders.
16. NSW Fair Trading can and should do a lot more for strata stakeholders, but that’s a departmental management issue and not a law reform matter.
17. Strata laws about by-laws are not broken [just misunderstood] and should be left alone to keep evolving naturally.
18. Unit entitlement change is a well-settled area of strata law based on long-term fundamentals and we should be careful to mess around with it just because a few stakeholders find it a bit hard.
19. We need to bring record keeping and access to strata information into the current century with adequate flexibility and safeguards to suit different buildings [from self-managed small schemes to the largest complexes].
20. Community title laws also urgently need reforms, so that should happen, and the changes should achieve more consistency between them.
Part Strata Schemes
21. There should be an express right of part strata scheme owners to seek Court or Tribunal orders about the meaning of provisions of Strata Management Statements in place of or in addition to the internal Strata Management Statement dispute resolution mechanisms.
22. There should be an express right of part strata scheme owners to seek Court or Tribunal orders about proposed changes to Strata Management Statements that were unreasonably refused by the other owners in place of or in addition to any internal Strata Management Statement dispute resolution mechanisms.
23. Part strata schemes should have an option to multi-party contracts and formal novation [as exists now] such that where part strata scheme contracts are made by an authorised agent [such as the part strata manager] and;
a. they must be recorded in a BMC contracts register with the obvious key information [date, party, expiry, etc];
b. a copy of the contract is kept in the BMC records and made available to owners on request; and
c. if a new owner is provided with a copy of the BMC contracts register and the copy contract/s;
then the disclosed agreement is automatically novated to the new owner unless they object before becoming an owner.
24. There should be an express right of part strata scheme owners to seek Court or Tribunal orders about shared facilities [scope; repair maintenance & replacement; rights; obligations, etc] as an automatic alternative to the internal Strata Management Statement dispute resolution mechanisms.
25. There should be an express right of part strata scheme owners to seek Court or Tribunal orders about shared facilities cost allocations as an automatic alternative to the internal Strata Management Statement dispute resolution mechanisms.
26. Existing shared facility cost review rights should also cover pre-2016 Strata Management Statements.
27. The strata laws should not permit the splitting of voting rights on different issues in part strata schemes based on shared facility contributions.
28. All part strata scheme decisions should require at least 72 hours notice before being made unless there is express agreement to reduce that in specific instances by all part strata owners.
29. There should be an express right for any part strata owner who considers a decision is wrong to review the decision [see my suggestions about dispute resolution].
30. Part strata scheme owner money should not be pooled, but rather be separately held, applied, and accounted for.
31. There should be an express obligation to reconcile estimated costs against actual costs each financial cycle in a part strata scheme within 3 months of the end of the cycle.
32. Any debit or credit due to a part strata scheme owner after reconciliation should actually be repaid to or by them.
33. Interest at the prevailing rate for the part strata scheme should be paid to or by an owner on any debit or credit due after reconciliation.
34. Part strata schemes should not be permitted to require payment for long-term costs that are held over multiple financial cycles.
35. If long-term funding is permitted in part strata schemes contributions for the long-term must specify the funding cycle of the contribution so as to trigger reconciliation provisions and specify which owner [the paying owner or actual owner] benefits or is liable for any adjustment.
36. Any long-term funds held by a part strata scheme muts be kept separately from operating money and not used for operating expenses.
37. There should be an express right for any part strata owner or group of part strata owners to take and defend legal actions in relation to the part strata scheme and deem that action to be taken by all part strata owners with protective requirements covering:
a. notification of the legal action to non-participating owners;
b. the ability for owners to opt-in or out;
c. indemnity for costs between owners; and;
d. entitlement to litigation proceeds between owners.
38. There should be an express right for all part strata scheme owners to be able to cross enforce conduct related Strata Management Statement provisions against each other plus the non-owner occupiers of any part of the building.
39. Strata building records should include all kinds of electronic communications and any data created as part of or relating to those records.
40. Require that when strata records are stored electronically by a strata manager, the strata building is guaranteed future access to them for at least 5 years by means [typically software] adequate to access those records.
41. Strata records should be kept for longer than 7 years [15 years or forever].
42. There should be an express statement that all strata records should belong to the strata building, and where there are legitimate third-party rights, the strata building should have an irrevocable licence to use them for strata operation purposes.
43. There should be an express statement that managers and executives can retain copies [at their own cost] of any strata records they have created for the strata building for their own personal use in connection with that strata building.
44. Tenants and persons authorised by tenants should also be able to inspect strata records
45. There should be an express requirement that strata buildings make all the strata records [back to the mandatory statutory retention period – currently 7 years] available at inspections.
46. Strata buildings that keep records electronically must create and maintain a searchable index of those electronic records [which is itself available for inspection].
47. That anyone entitled to inspect strata building records has a right to request copies of electronic records to be provided electronically.
48. There should be an express provision that strata certificate updates or refreshes should be available for a reduced fee on 24-48 hour turnaround.
49. To preserve strata owners’ private information, I suggest that the strata laws include the following new provisions:
that extra information provided by owners and tenants to the strata building covering personal contact information [including multiple sets] becomes part of the strata roll [as additional optional information];
if that information is provided and recorded on the strata roll, it is available to anyone entitled to inspect the strata records; and
an owner or tenant can ask that this additional personal contact information is removed from the strata roll in which case it must be deleted.
50. NSW Fair Trading should issue public guidance information about the application of privacy laws in strata buildings.
51. There should be an express obligation on strata buildings that specified key building information to be kept and updated.
52. Strata buildings should make key building information available publicly by display at the building and/or publishing it in an electronically searchable way.
53. NSW Fair Trading should explore [with public consultation] a regulator administered public register of key strata building information.
54. To preserve the intellectual property in strata building information, I also suggest that the strata laws include the following provisions:
an express statement that all strata records should belong to the strata building;
where there are legitimate third-party rights to information, the strata building should have an irrevocable licence to use them for strata operation purposes; and
the right of strata buildings to share its information [including for a fee or other benefit].
55. Strata laws should require quorums of 50% of the strata owner/voters or committee meetings.
56. Strata laws should include mechanisms that allow ‘provisional’ decisions to be made at no-quorum meetings which can be completed by post-meeting votes up to 14 days after the vote.
57. Strata laws should not limit the number of proxies a person can hold.
58. Strata laws should not should restrict who can be appointed as a proxy.
59. Strata laws include an express requirement for the making and keeping of a record of proxies received, invalidated, and used on decisions made at strata meetings to be provided with the meeting minutes.
60. There should not be secret ballots.
61. NSW Office of Fair Trading should provide information about priority votes as part of a larger strata operations awareness campaign.
62. Strata laws should impose stricter obligations on the secretary to send meeting notices to mortgagees when required.
63. Strata laws should require an express notification on motions that permit priority voting rights explaining that a lot owner’s mortgagee could vote in the strata owners’ place.
64. Strata laws should automatically allow electronic and pre-meeting based on the secretary’s express decision to do so [notified to owners].
65. Strata laws should not limit what decisions can be made by electronic and pre-meeting voting.
66. Strata laws should permit pre-meeting and live voting when electronic voting is used.
67. Strata laws should permit or require new kinds of decision/motion categorisations that can streamline strata meetings, voting, and decisions.
68. Strata laws should permit or require that all strata meeting agenda items include an explanation of the motion and other information to assist strata owners/voters make their decision.
69. Strata laws should permit no decision meetings of owners.
70. Strata laws should permit polls, surveys, and other canvassing activities and provide that they do not and cannot impact any later decisions.
71. Strata laws should include an express requirement that strata managers must also include a reason or reason for exercising a function when making the record under s 55(1).
72. Strata laws should require strata managers to provide a copy of the records and reasons made under s 55(1) to strata owners within 7 days of doing making it.
73. The financial information that needs to be kept and reported should be restructured to properly represent the strata buildings’ actual financial position.
74. Strata laws should require that financial information is reported in ways that strata owners can see their individual exposure in normal and worst-case scenarios.
74. Strata laws should require all financial information to be recorded electronically in a universally accessible format.
75. Strata laws should require strata building financials records to be made and reported on an accruals basis.
76. Strata laws should require strata buildings to record and report liabilities [actual and contingent] and creditors in their financial accounts and reports.
77. Strata laws should require that when every strata building considers audits at general meetings that decision is supported with details of the proposed audit specifying the investigation scope and any limits or exclusions.
78. Strata laws should require strata buildings to make more detailed financial information available including source/primary materials.
79. Strata laws should require strata buildings to prepare fixed cycle financial reports.
80. Strata laws should require strata buildings to prepare up-to-date financial reports [including for part periods] to strata owners when making financial decisions if they are out of sync with financial cycles.
81. Strata laws should require the financial records and reports to more fully detail strata loans; amount, terms, repayments, and levy provisions.
82. Strata laws should require strata information certificates to include strata loan information to allow purchasers to properly understand the liabilities they are taking over.
83. Strata laws should require strata buildings to record and report non-mutual income, deductions, capital gains, and losses to strata owners.
84. Strata laws should require developers to provide capital items, plant and equipment details as part of the new building handover items.
85. Strata laws should require strata buildings to keep and report records of capital items, plant, and equipment annually.
86. There should be no interest on late paid strata levies unless the strata building actually suffers losses as a result [which could be calculated based on lost interest on reserves, cost of borrowing money to cover the shortfall, interest & penalties paid to creditors, etc]
OR AT LEAST
87. The interest rate for late paid strata levies should move regularly to better match prevailing market rates.
88. Discounts for early levy payments should be abolished.
Building Structure Issues
89. The common property memorandum should be abolished.
90. Strata buildings should maintain a register of building alterations covering the changes, dates, ownership, responsibilities, etc [including noting disputed matters].
91. Strata laws reinstate the obligation on owners to notify the strata building of improvements in their strata lot.
92. A sunset on approvals for the sole use of common property should exist to ensure that it is not permanently lost to the other strata owners.
93. Where the use of limited capacity common property resources is allocated to one or more owners the strata laws should provide a mechanism to revisit that allocation when other owners later also want to use those resources.
94. If common property is allocated for permanent use by one or more lot owners [however done] the strata laws require compensation to be paid by the benefitted owners to the other owners [and not to the strata building] for their loss of property interests.
95. Introduce a qualifier to the strict duty to maintain, repair, and replace common property that allows strata building a reasonable time to effect the necessary works given the circumstances applying at the time.
96. Initial maintenance schedules should be abolished.
97. Strata laws should be restructured to provide for a clearer regime for owners’ works approvals that escalate thresholds progressively based on a set of criteria that are wider than the works themselves.
98. Strata laws should permit strata buildings to modify the approval thresholds for owners’ works.
99. Strata laws should permit retrospective approvals but allowing strata buildings to consider [reasonably] the circumstances giving rise to the need for retrospective approval.
100. Strata laws should impose default obligations for works onto the owner of the property where they are performed unless changed or negatived by the approval conditions
101. So, I suggest that the strata laws provide that BIM details for the building are provided by the developer if available.
102. Strata laws should expressly permit strata buildings to 3D map their buildings as part of their functions.
103. Re-instate the need for written owner’s consent to common property rights by-law changes or repeals.
104. Remove any limits on the ability of owners to appoint agents under s 155.
105. Require strata owners to notify the strata building if they install or make improvements that exceed $5,000 in value.
106. Consider imposing limits on meeting dates, times, and locations, or at least, give express order powers NCAT to prevent meetings that are unreasonably scheduled.
107. Require that all levies [contributions] must be notified to strata owners before they are liable to pay them [not just special levies].
108. Permit strata buildings to decide to reduce interest on overdue levies anywhere below the statutory amount of 10%.
109. Clarify the purpose of the strata and building managere transfer provisions [including any limits] in ss 51 and 69.
110. Remove the restriction on the use of electronic or pre-meeting voting for strata committee elections.
111. Permit strata buildings to determine an annual cycle for their financial year and annual general meeting [and to change it from time to time]
112. Clarify what happens to 1961 Act lot boundaries in mixed application situations.
113. Abolish the requirement that strata building legal action or work requires a general meeting approval.